NOHMI BOSAI LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥57.02B
• Operating Income: ¥2.88B
• Net Income: ¥2.08B
• EPS: ¥35.72

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

FY2026 Q2 was a mixed quarter for Nohmi Bosai: solid top-line growth but clear margin compression led to double-digit declines in operating and bottom-line earnings. Revenue rose 4.5% YoY to 570.2, while operating income fell 20.1% YoY to 28.8 and net income declined 17.2% to 21.0. Gross profit reached 184.9 with a gross margin of 32.4%, but SG&A at 156.1 (27.4% of revenue) kept operating leverage negative. The operating margin compressed to roughly 5.1%, down about 156 bps from an estimated 6.6% in the prior-year period. Ordinary income of 32.7 (-13.9% YoY) implies a margin of 5.7%, about 123 bps lower YoY. The net margin was 3.7%, around 97 bps lower YoY, reflecting weaker operating profit and a relatively high effective tax rate of 36.2%. Non-operating income of 4.28 supported earnings (dividends 0.89, interest income 0.31), but the contribution is not large enough to offset operating softness. Despite weaker margins, cash generation was strong: operating cash flow was 94.3, roughly 4.5x net income, indicating favorable working capital movements or milestone collections. The balance sheet remains exceptionally conservative with cash of 460.0, current ratio of 520% and minimal interest-bearing debt (short-term loans 1.5), resulting in interest coverage of 288x. Asset efficiency and capital productivity are the weak spots: asset turnover is 0.366 and ROIC is 2.2%, well below a 7–8% target range for high-quality industrials. DuPont shows a low ROE of 1.6% driven primarily by low net margin and modest asset turnover, with only limited contribution from financial leverage (1.21x). The implied payout ratio of 219.9% appears elevated, but dividend data are unreported—this figure should be treated cautiously until confirmed. Forward-looking, the key questions are whether margin pressure is transitory (product mix, project timing, wage and procurement cost inflation) and whether the strong OCF can persist. Near-term priorities include tightening SG&A growth relative to revenue, improving project pricing/mix, and converting the large cash position into higher-ROIC uses without compromising financial safety. If execution improves and pricing discipline holds, margins can recover; absent that, ROIC is likely to remain below cost of capital.

Profitability Analysis

ROE (1.6%) decomposes into Net Profit Margin (3.7%) × Asset Turnover (0.366) × Financial Leverage (1.21x). The most material drag this quarter was net margin compression, as operating income declined 20.1% on 4.5% revenue growth, driving the operating margin down about 156 bps YoY. Business drivers likely include higher SG&A (e.g., wage inflation, selling expenses) relative to revenue and project/product mix (installation vs. maintenance) pressuring gross-to-operating conversion. Asset turnover remains modest at 0.366, reflecting a large asset base (notably cash and receivables) against semiannual sales typical of project-based businesses. Financial leverage is low at 1.21x, which restrains ROE upside but underpins financial resilience. Sustainability: margin pressure could ease if procurement conditions normalize and pricing catches up, but without tighter SG&A control and mix improvement, the current margin profile could persist. Watch for concerning trends: SG&A growth outpacing revenue would further erode operating leverage; given the data gaps, we infer this risk from the decline in operating income vs. revenue growth.

Growth Assessment

Revenue growth of 4.5% YoY indicates steady demand in the core fire protection markets, likely underpinned by ongoing construction activity and maintenance needs. However, profit growth is not keeping pace: operating income fell 20.1% and ordinary income fell 13.9%, highlighting margin pressure. Non-operating income was 4.28 (about 0.75% of sales), helpful but not a growth engine. The earnings decline despite top-line growth suggests price/mix headwinds, cost inflation, or timing of project recognitions. Outlook hinges on order intake quality (higher-margin maintenance, system upgrades) and the pace of cost pass-through. With OCF robust this period, execution on collections and project milestones appears solid, but sustainability depends on backlog conversion and AR discipline. Given the low ROIC (2.2%) and low asset turnover, improving asset efficiency (inventory and receivable turns, cash deployment) is a medium-term growth lever for EPS and ROE. Absent clearer disclosure on order backlog and SG&A drivers, we assume mid-single-digit revenue growth with cautious margin trajectory near term.

Financial Health

Liquidity is exceptionally strong: current ratio 520.5% and quick ratio 494.4%, with cash and deposits at 460.0 versus current liabilities of 197.4. No warning on current ratio (<1.0) or leverage (D/E 0.21x)—both are comfortably healthy. Maturity mismatch risk appears minimal: short-term loans are only 1.5, while cash and receivables total ~846.4, and accounts payable is 28.7. Total liabilities are 265.9 against equity of 1,293.2, underscoring low balance sheet risk. Off-balance sheet obligations are not disclosed in the provided data. The conservative structure provides ample flexibility to navigate project timing and invest for growth.

Cash Flow Quality

Earnings quality is strong this period: OCF/Net Income is 4.49x (>1.0 benchmark), indicating robust cash conversion, likely aided by milestone collections or favorable working capital swings. Free cash flow is unreported; however, with OCF at 94.3 and modest debt service needs, baseline FCF generation appears supportive of maintenance capex and ordinary dividends. Working capital: receivables (386.4) are sizable relative to half-year sales, typical for project-based billing; continued improvement in DSO would de-risk cash conversion. No signs of aggressive working capital manipulation are evident from available data, but lack of inventory and payable turnover details limits definitive assessment.

Dividend Sustainability

Dividend data (DPS, total dividend paid) are unreported, and the calculated payout ratio of 219.9% likely reflects assumptions or special factors; treat with caution until company guidance is confirmed. On cash coverage, current OCF (94.3) would comfortably cover a normal dividend outlay for a company of this size, assuming no outsized special distributions. With a net cash position and minimal financing needs, baseline dividend capacity appears sound; sustainability depends on maintaining OCF and avoiding a structural decline in operating margin. Policy-wise, the large cash balance could support stable dividends, but low ROIC argues for careful capital allocation between dividends, growth investments, and potential buybacks.

Risk Assessment

Business Risks:

• Project margin pressure from input cost inflation and pricing lag
• Product/service mix shifts (installation vs. maintenance) impacting margins
• Timing of large projects affecting quarterly earnings volatility
• Regulatory/certification changes that alter product specs or costs
• Supply chain lead times for critical components

Financial Risks:

• Low ROIC (2.2%) and low asset turnover constrain value creation
• High effective tax rate (36.2%) dampens net profitability
• Receivables concentration and collection timing risk in project business
• Potential dilution of returns from a large idle cash balance

Key Concerns:

• Operating margin compressed ~156 bps YoY with operating income -20.1% despite +4.5% sales
• Sustained SG&A intensity (27.4% of sales) limiting operating leverage
• Visibility gaps: no disclosure on backlog/orders and SG&A breakdown
• Dividend payout ratio reported as 219.9% is inconsistent with unreported DPS—requires verification

Investment Implications

Key Takeaways:

• Top-line growth continued, but profitability deteriorated due to margin compression
• Cash generation was strong and balance sheet remains fortress-like
• Capital efficiency is weak (ROIC 2.2%, ROE 1.6%), limiting equity value accretion
• Non-operating income provided a modest cushion but is not a structural driver
• Near-term focus should be on margin recovery and working capital discipline

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio
• Gross margin by segment/product (if disclosed)
• Order intake, backlog, and book-to-bill
• Receivable days (DSO) and OCF/Net Income
• ROIC progression and cash deployment plans
• Effective tax rate trajectory
• Dividend policy disclosures (DPS, payout, buybacks)

Relative Positioning: Within Japan’s fire protection and building safety peers, Nohmi Bosai exhibits a highly conservative balance sheet and strong cash conversion this quarter but lags on capital efficiency and margin resilience; near-term execution on pricing, mix, and SG&A control will determine whether it can close the profitability gap.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis